The Central Bank of
Nigeria (CBN) Monday unveiled new requirements for Bureaux de Change (BDCs) operating
across the country, reports DigitalSENSE
Business News.
A press statement
endorsed by Isaac A. Okorafor on behalf of CBN’s Director, Corporate
Communications, and made available to DigitalSENSE Business News in
Abuja, said the new requirements were being introduced in a bid to correct
observed deficiencies in the operation of BDCs in the country, “which have led
to gross inefficiencies and sharp practices in the foreign exchange market, has
taken steps to check the growing incidence of rent-seeking, depletion of
external reserves, financing of unauthorised transactions and dollarisation,
among others.”
Also, DigitalSENSE Business News
gathered that CBN direction was in line with the powers vested on it by the
Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 17 of 1995 and
the BOFI Act of 1991, the Central Bank of Nigeria (CBN) licenses and regulates
Bureaux de Change (BDC) operations in Nigeria to among other things “Provide
access to foreign exchange to small-scale end-users; Serve as tools for the
management of exchange rate; Assist in the fight against illegal financial
activities; Facilitate economic activities; and Provide economic data for
policy decisions.”
DigitalSENSE Business News, further
reports that CBN observed with grave concern the deficiencies in the
operational effectiveness of BDCs, which runs counter to the aforementioned
objectives.
Particularly, CBN
lamented the avalanche of rent-seeking operators only interested in widening
margins and profits from the foreign exchange market, regardless of prevailing
official and interbank rates; Weak and ineffective operational structure,
resulting in the subsector completely abandoning the objectives for its
establishment;
In addition, CBN decried
depletion of the country’s foreign reserves, in view of the unusually large
number of BDCs; Potential financing of unauthorized transactions with foreign
exchange procured from the CBN Window; Gradual dollarization of the Nigerian
economy with attendant adverse consequences on the conduct of monetary policy
and subtle subversion of cashless policy initiative; and Inadequate level of
minimum paid-up capital.
According to CBN, the
required minimum paid-up capital of BDCs is set at N10 million. While the
capital requirements of all other CBN-regulated entities have been reviewed
upwards over the years, the one for BDCs has remained the same; and prevailing
ownership of several BDCs by the same promoters in order to buy foreign
exchange multiple times from the CBN Window, which is clearly related to the
low level of capital requirements for licensing BDCs.
However, the new requirements entails that the
minimum capital requirement for the operation of BDCs in Nigeria is reviewed to
N35 million; The mandatory cautionary deposit is reviewed to N35 million and
shall be deposited in a non-interest yielding account in the CBN upon the grant
of Approval-in-Principle; The following fees shall apply to the licensing of
BDCs: Application Fee—N100,000.00; Licensing Fee—N1 million; and Annual Renewal
Fee—N250,000.00; and Ownership of multiple BDCs is not permissible, and would
be punishable if detected.
Additionally, CBN
insisted that all existing BDCs and those currently operating with a Final
Approval Letter (FAL) are required to comply with the requirement on mandatory
cautionary deposit by 15 July 2014, while all current applications are expected
to comply with these new requirements.
Furthermore, the compulsory membership of the Association of Bureau De Change Operators of Nigeria (ABCON) is no longer a requirement for the licensing of BDCs.
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